Modvat credit denied for capital goods used outside factory premises

The Tribunal allowed the Appeal filed by the Revenue, ruling that Modvat credit cannot be availed for capital goods used outside the factory premises, as per Rule 57S of the Central Excise Rules, 1944. The weighing bridge, for which Modvat credit was claimed, was found to be installed outside the factory premises after the respondents came under the Compounded Levy Scheme, making duty payable on goods used for commercial purposes outside the factory.

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Issues involved:
The issue involved in this Appeal is whether Modvat credit of the duty paid on capital goods is available to M/s. Shree Prithvi Rolling Mills (P) Ltd.

Summary:

Issue 1: Modvat credit availability
The respondents had taken Modvat credit of the duty paid on weighing bridge, which was later found to be installed outside the factory premises. The Central Excise officer disallowed the Modvat credit citing Rule 57Q of the Central Excise Rules, 1944. The Senior Departmental Representative referred to a Supreme Court decision and argued that Modvat credit cannot be availed for capital goods used outside the factory premises. The representative distinguished previous cases cited by the Commissioner (Appeals) as the weighing bridge in this case was indeed outside the factory premises.

Decision:
Upon reviewing the submissions and records, it was found that the weighing bridge, for which Modvat credit was claimed, was moved outside the factory premises after the respondents came under the Compounded Levy Scheme. As per Rule 57S of the Central Excise Rules, 1944, duty became payable on the goods used for commercial purposes outside the factory. The Tribunal agreed with the Senior Departmental Representative's argument and allowed the Appeal filed by the Revenue.

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